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TMI Blog2019 (10) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case. We find the issue in hand is covered by the orders of this Tribunal from Assessment Years 200506 to 2011-12 in assessee's own case which are placed on record from Pages 259 to 310. The latest order being dated 05.07.19 in assessee's own case for Assessment Year 2009-10 is reproduced hereinbelow: "4. The only issue is to be decided is as to whether the CIT(A) is justified in confirming the addition made by the Assessing Officer on account of leave encashment in the facts and circumstances of the case. 5. Heard both parties and perused the materials available on record. The Hon'ble Supreme Court in the case of Exide Industries Ltd. vs. Union of India granted stay against the decision of Hon'ble High Court of Calcutta in the case of Exide Industries Ltd. reported in 292 ITR 470(Cal) until further orders vide order dated 08.09.2008. Further, during the pendency of Civil appeal the Hon'ble Supreme Court was pleased to direct assessee therein to pay tax as if section 43B(f) is on the Statute Book though it would be entitled to make claim in the return vide order dated 08.05.2009. Keeping in view of the above orders of Hon'ble Supreme Court, on similar c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars Amount 1 Sales tax remission since capital in nature 3,98,70,574/- 2 State capital subsidy since capital in nature 59,75,000/- The assessee claimed that the above receipts are not taxable in the hands of assessee under the normal provision of computation of income. Therefore, same are also eligible for deduction u/s 115JB of the Act. The assessee also submitted that sales tax remission and state capital subsidy was received by it under the West Bengal Incentive Scheme, 2000, which was given to it to achieve industrialization of backward areas as well as to generate employment opportunities. However, the AO observed that there is no provision under the Income Tax Act for allowing deduction on account of capital receipt under the provision of Sec. 115JB of the Act. Accordingly, AO disallowed the claim of assessee and added to the total amount of subsidy received by it while calculating the tax under Minimum Alternate Tax (MAT) provision. 11. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that incentive was received by it on account of sales tax remission of Rs.3,98,70,574/- and state capital investment subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted. The appellant has contended that an item without any element of profit or income ,when credited to the profit and loss account prepared under Part-2 & Part III of Schedule IV of the Companies Act, 1956, lays down that' P& L should be made to closely disclose the "working" of the company. Since, in the present case, the subsidy has been credited to P& L a/c, in order to work out the real profit of the company u/s 115JB said amount needs to be deducted, following the decision of the Hon'ble Supreme Court in Apollo Tyres (2002) 255 ITR 273 (SC) rw Indo Rama Synthetics (I) Ltd vs CIT(2011) 330 ITR 363(SC). The appellant has also relied upon the judgment in the case of CIT vs Veekaylal Investments CO.(P) Ltd (2001) 249 ITR 597(BOM), although the copy of judgment in this case was not furnished. The reliance on the decision by the Hon'ble Mumbai High Court by the appellant is found to be misplaced, it was observed by the Hon'ble High Court that, "The important thing to be noted is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5JB, the net profit as shown in the profit and loss account, in the relevant previous year, can only be adjusted i.e., increased or reduced, as the case may be, by reference to heads referred in clauses (a) to (ha) and clauses (i) to (iv) of the Explanation to section 115JB. It is found from findings of fact on record that the assessee admittedly, had itself credited the amounts of S.T subsidy and state investment subsidy to the profit and loss account which was duly certified by the auditors ,in view thereof the A.O correctly held that no adjustment could be made subsequently for computation of MAT profits by reducing the impugned receipts from the 'book profit' for the purpose of 115JB of the Act. It is the case of the assessee that since these impugned receipts are in the nature of capital, receipts, it was contended that the same shall not be charged to tax and as such the same should be reduced from the net profit determined in the profit and loss account prepared by the assessee' while computing "book profit" within the meaning of section 15JB of the Act. The A.R of the appellant has contended that the provisions contained in sub-section (5) of section 115JB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 409/174 Taxman 118 which has been rendered in the context of section 115JA of the Act. As per sub-section (5) of section 115JB of the Act, which reads as "save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section". Having regard to expression "save as otherwise provided in this section" used in this subsection (5) of section 115JB of the Act, we are of the considered opinion that the expression "save as otherwise provided in this section 115JB" clearly means that what is provided in section 115JB should be religiously followed and anything over and above the matter provided in section 115JB will be subject to other provisions of the Act. The provisions of section 115JB have an overriding effect upon other provisions of the Act as is evident from the section itself. Thus, the method of computation of book profit provided in the Explanation to section 115JB should be strictly followed while computing the book profit and the normal provisions of computation of profit under any head of the Act shall not be applicable. The A.R of the appellant has also relied upon the judgment of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct permit the exclusion of the capital gain from the P&L Account or not? In other words, can a P&L A/c drawn up without considering the capital gain said to be in accordance with the provisions of Parts II and II of Sch. VI to the Companies Act or not?" It was accordingly held that in the absence of any provision for exclusion of exempted capital gain in the computation of book profit under the provisions contained in Explanation to section 115JB of the Act, the assessee is not entitled to the exclusion thereof as claimed. Thus, the argument that impugned capital receipts are to be reduced from the net profit shown in the profit and loss account prepared under the Companies Act for the purpose of computing book profit under section 115JB of the Act is not tenable. If such reduction is allowed from the net profit determined in the profit and loss account for the purpose of computing "book profit" under section 115JB of the Act, the same would certainly be against the above referred decisions laid down by the honourable Supreme Court in the case of Apollo Tyres Ltd. (supra) and HCL Comnet Systems & Services Ltd. (supra) wherein the powers of the Assessing Officer while computing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 9(1)(i) covers direct and indirect transfers of capital assets" ... The language of the section is unambiguous and there is no doubt regarding its interpretation particularly when there is specific mechanism provided in sec.115JB, which is a code in itself for computation of deemed income of MAT companies. The exclusion of the impugned capital receipts sought by the appellant is not tenable by giving purposive interpretation particularly since such interpretation is to transform the concept of Book profit for the purpose of section 115JB of the Act. On the contrary, the sections which impose the charge or levy, should be strictly construed and this position though was reiterated by the Apex Court in CIT v. Mahaliram Ramjidas [1940] 8 ITR 442; and subsequently by the Supreme Court in (PC) India United Mills Ltd. v. CEPT[1955] 27 ITR 20 in the case of India United Mills and thereafter the various other judgments, still prevails as the correct law. The entire mechanism for the computation of book profit is clearly set out in subsection (1) of section 115JB read with Explanation thereto. The starting point being the net profit as shown in the profit and loss account prepared i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brothers, Pune reported in 400 ITR 279 (SC). He requested the Bench to decide the issue on merit. On the other hand, Ld. DR supported the order of Authorities Below. 13. We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. From the foregoing discussion, we note that subsidy was given by the Govt. of West Bengal for the purpose of enabling the entrepreneurs to establish new industry and also expand the existing industries. Under normal computation of income the subsidy given to promote the industries are not subject to tax, therefore, an item which is not taxable cannot be brought to tax under the provision of MAT. In holding so, we rely on the order of this coordinate Bench of this Tribunal in the case of Sicpa India (P) Ltd. (supra) wherein it was held as under:- "22. We have heard the submission of the learned counsel for the Assessee. As far as the excluding the subsidies in question from computation of book profit u/s 115JB of the Act is concerned, the provisions of Sec.115JB of the Act have to be looked at. Section 115JB of the Act provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid decision of the Hon'ble High Court rendered on identical facts as that of the Assessee's case, there can be no doubt that subsidies in question does not have any character of income. 24. When a receipt is not in the character of income, can it form part of the book profits for the purpose of Sec.115JB of the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Dy. CIT v. Binani Industries Ltd. [2016] 178 TTJ 658 : had to deal with a case where the question was as to whether receipts on account of forfeiture of share warrants amounting to Rs. 12,65,75,000/-, being a capital receipt, would be liable for taxation u/s 115JB. The tribunal after referring to several decisions on the issue viz., the Hon'ble Apex Court in case of Indo Rama Synthetics (I) Ltd. v. CIT [2011] 330 ITR 336/9 taxmann.com 25, Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273/122 Taxman 562 (SC), Special Bench ITAT in the case of Rain Commodities Ltd. v. Dy. CIT [2010] 40 SOT 265 (Hyd.) (SB), ITAT Luknow Bench in the case of ACIT v. L.H. Sugar Factory Ltd. and vice versa in ITA Nos. 417 , 418 & 339/LKW/2013 dated 9.2.2016 and decision of Mumbai ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik Venture (P.) Ltd. (supra) which was a case where the question was whether profits arising on transfer of a capital asset by a company to its wholly owned subsidiary company which is not treated as income" u/s 2(24) of the Act and since it does not form part of the total income u/s.10 of the Act and therefore does not enter into computation provision at all under the normal provisions of the Act, the same should be considered for the purpose of computing book profit u/s 115JB of the Act. The Mumbai Bench held as follows: '26. We shall now examine the scheme of the provisions of sec. 115JB of the Act. It is pertinent to note that the provisions of sec. 10 lists out various types of income, which do not form part of Total income. All those items of receipts shall otherwise fall under the definition of the term "income" as defined in sec. 2(24) of the Act, but they are not included in total income in view of the provisions of sec. 10 of the Act. Since they are considered a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lar to the Maharashtra cases, in that the amount of entertainment tax collected was to be retained by the new Multiplex Theatre Complexes for a period not exceeding four years, we are of the view that West Bengal cases must follow the judgment that has been just delivered in the Maharashtra case." The undisputed fact is that the incentive received by assessee is not in the nature of income earned during the course of business. Therefore, in our considered view, same cannot be regarded as "income" for the purpose of MAT u/s 115JB of the Act. Thus, the amount of incentive received by assessee should be excluded from the determination of book profit under the provision of Section 115JB of the Act. Thus, we reverse the order of Ld. CIT(A). and direct the AO to delete the same. This ground of assessee's appeal is allowed." 4. There is no distinction on facts or law pointed out at the Revenue's behest. We thus adopt judicial consistency in the impugned assessment year to accept assessee's instant latter substantive ground of its appeal ITA 1153/Kol/2017 is partly allowed therefore." 8. In view of the order of this Tribunal reproduced above, the order of CIT(A) is not justified and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced reliance on the order of Kolkata Tribunal. Therefore, we find no infirmity in the order of CIT(A). Thus Ground No.2 raised by the Revenue is dismissed." 13. In view of the above, we find no infirmity in the order of CIT(A) and it is justified. Ground No.1 raised by the Revenue is dismissed. Ground No.2 is relating to deletion of disallowance made u/s 14A of the Act. 14. We find no dividend income earned by the assessee in the year under consideration when there is no dividend income earned the disallowance u/s 14A is not maintainable. It is noted that same issue arose in Assessment Year 2009-10 and this Tribunal by placing reliance in the case of Oil Industries Development Board of Hon'ble Supreme Court vide its order dated 16.02.2018 wherein the Hon'ble Supreme Court confirmed the ratio laid down by the Hon'ble High Court of Delhi in the case of Cheminvest Ltd. that no disallowance is to be made when there is no dividend income earned. The relevant portion in assessee's own case for Assessment Year 2009-10 is reproduced hereinbelow: "14. Ground No.3 is relating to deletion of disallowance made u/s 14A of the Act. 15. Heard both parties and persued the materials availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of which is reproduced hereinbelow: "The Revenue's appeal challenges an order of the Income Tax Appellate Tribunal (ITAT) which had set aside the disallowance of Rs. 1,62,49,000/- under Section 14A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). The Assessing Officer (A.O) and later the CIT(A) made the disallowance by taking into account only the investment patterns of the assessee for the concerned assessment. The ITAT relied upon the ruling of this Court in Cheminvest Limited vs. Commissioner of Income Tax-VI, (2015) 378 ITR 33 which ruled in the absence of any exempt income, disallowance under Section 14A of the Act of any amount was not permissible. Since the decision in Cheminvest Limited (supra) was followed, there is no substantial question of law that requires consideration." 17. In the light of above discussion, we find no infirmity in the order of CIT(A) and accordingly it is justified. Thus Ground No.3 raised by the Revenue is dismissed." 15. In view of the order of Tribunal in assessee's own case reproduced hereinabove, we find no infirmity in the order of CIT(A) and it is justified. Ground No.2 raised by the Revenue is dismissed. 16. G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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